[Freepress]: Who's making money off medical marijuana?

Who's making money off medical marijuana?
It's not who you'd think; growers don't get rich -- unless they break the law

BY KATHERINE YUNG
FREE PRESS BUSINESS WRITER

In a small second-story office on Main Street in Ann Arbor, Liberty Clinic is doing brisk business, selling medical marijuana for $360 to $400 an ounce. In just 3 1/2 months, 750 patients have come through its doors.

In Lansing, Danny Trevino has expanded beyond his HydroWorld hydroponics store, adding two medical clinics, grow classes and a dispensary.

And in Ypsilanti, Darrell Stavros and his partners have set up a medical marijuana service center, renting space to a support group, doctors and a bong shop. "This is creating an enormous amount of businesses that never existed," he said.

Medical marijuana, one of the state's newest industries, is taking off. Dozens of hydroponics stores, medical clinics and grow schools are popping up. And at support groups, cafés and dispensaries, patients and growers are buying and selling the drug.

As with any industry, there are challenges, such as crop failures and theft. And limits on the size of growers' crops make it all but impossible for growers to get rich, though they can earn some decent money.

"A few people will make a few bucks. Most people won't make much," said Adam Brook, organizer of the annual Ann Arbor Hash Bash.
Entrepreneurs cashing in on services tied to growing

In Michigan's burgeoning medical marijuana industry, few rules exist, much of the business occurs in secrecy and the only way for growers to make big bucks is to break the law.

"If you operate within the law, you're not going to make a lot of money," said Leili Russo, who grows marijuana for medical purposes and serves as the secretary of the Genesee County Compassion Club in Flint.

Growers, also called caregivers, say that at best, they can make $40,000 a year. And that's after spending $1,000 or more on equipment and other supplies, and putting in countless hours every day tending to plants.

Under Michigan's medical marijuana law, caregivers can supply only five patients. Each patient can have 12 plants. But growers who choose to ignore these rules can easily make $100,000, said Brook, an industry consultant, an annual rally to support reforming marijuana laws.
Sometimes, greed doesn't pay

With these conditions, it's no surprise that medical marijuana is becoming a big business in Michigan's depressed economy. Nineteen months after residents voted to legalize medical marijuana, the industry has attracted more than 8,000 caregivers, people who grow and harvest marijuana plants so they can be turned into medicine for patients, according to the Michigan Department of Community Health.

For caregivers who abide by the law, this kind of work is usually a second job. That's the case with Corey Hathaway, 33, of Eaton Rapids. Hathaway used to run his own commercial construction company, but that business dried up when the economy tanked. So he found a job working at HydroWorld, a hydroponic shop in Lansing. To supplement his income, he also is a caregiver with five patients.

"The people that are greedy don't succeed because they can't maintain the patient-caregiver relationship," he said.

The law is vague about what caregivers can do if they produce more marijuana than their patients need. To make extra money, some sell their overages on the black market or to dispensaries, clinics or other caregivers.
Making money without plants

Growing marijuana is just one part of the rapidly expanding industry. Experts say more lucrative opportunities can be found selling the hydroponic equipment that caregivers need and teaching them how to grow marijuana properly. Another moneymaker: operating clinics that help people get the paperwork they need to qualify as medical marijuana patients.

These kinds of service businesses are springing up all around the state and are the most visible part of the industry. Already, price wars have sprung up among the dozens of hydroponic shops that have opened in southeast Michigan.

The intense competition hasn't stopped Kriss Pullen-Gideons from believing that her store, Gro Blue in downtown Ann Arbor, has a bright future. She used some of her retirement savings to open the small shop on West Liberty, and her son and daughter are co-owners.

"People are surprised at how many regular people just walk through the door," she said. "It's definitely going to be a growing industry. We should embrace it."

Hydroponic stores aren't the only ones cashing in. Attorneys, grow consultants, grow-room designers and contractors and grow schools are all finding a market for services.

"There are so many people that are excited about being able to work," said Michael Komorn, a Southfield medical marijuana attorney and the treasurer of the 17,000-member Michigan Medical Marijuana Association. "They want to get back into the marketplace."

Entrepreneurs also are flocking to the sales side of the business, operating an estimated 20 dispensaries, cafés and clinics in the state, according to medical marijuana attorneys. At Liberty Clinic in Ann Arbor, above bd's Mongolian Grill on Main Street, patients pay $12 for an annual membership that allows them to purchase different strains of marijuana, which are displayed in small see-through packets on a counter. Liberty buys its marijuana from caregivers throughout the state.

"We hope to be a model," said the owner, a former home inspector for Bank of America who would only give his name as James Chainsaw.

Michigan law does not specifically address these kinds of clinics and dispensaries. But industry experts expect that it will only be a matter of time before courts challenge their legality. Already, a number of cities and towns have passed ordinances prohibiting medical marijuana businesses.
Groups could change things

To stay within the law, many patients and caregivers are buying and selling marijuana at facilities operated by a few so-called compassion clubs, which act as support groups for patients.

The Genesee County Compassion Club is the state's largest, with more than 1,000 members. Every Tuesday, Thursday and Saturday, it holds private meetings for members at its office in a small strip mall in Flint; smoking marijuana is permitted. Membership costs $20 a year and includes a T-shirt.

The Ypsilanti Compassion Club takes a different approach. Its members meet at the 3rd Coast Compassion Center in Ypsilanti, which is open every day except Sunday. Marijuana smoking is allowed in some of the rooms. "We provide them a safe office environment," said Darrell Stavros, one of the owners of 3rd Coast, which rents space to the club.

Whether these kinds of facilities will become the main avenue for medical marijuana sales in Michigan remains to be seen. But one thing's for certain. With more than 1,000 medical marijuana patient applications arriving in Lansing each week, the industry is only going to get bigger, with all kinds of business ventures likely to be launched.

"It's definitely the wild, wild Midwest," said Matthew Abel, one of the state's leading medical marijuana attorneys.